Nygren on Apple: Value Managers Can Still Like ‘Growth’ Companies

By Brendan Conway

Bill Nygren, manager of the Oakmark Fund (OAKMX), told listeners at the Morningstar Investment Conference Wednesday why he thinks it’s not a contradiction for “value” managers to own Apple’s (AAPL) stock.

Short version: Since when is growth a bad thing?

“As a value manager, I don’t have to say, ‘I don’t like growth,’” he explained, arguing that Apple trades at eight to times earnings once you strip out cash — hence the attraction to a value-minded investor. “It’s cheaper than Cummins Engine (CMI), which I also own, and yet no one questions why a value manager [owns that stock.]“

“[An investor just] needs to be really careful about paying a premium for growth,” he said.

Prompted by moderator Shannon Zimmerman whether “value” and “growth” investing are really that different, Nygren challenged the idea that “growth” and “value” investing styles are opposites. “It’s a distinction without a difference,” he said. “I’ve never thought growth and value are opposite ends of the continuum … [they're] the opposite of momentum investing.”

Nygren’s co-panelist Steve Wymer, manager of Fidelity Growth Fund (FDGRX), also weighed in on Apple … with a cautious note. Smartphone sales in the developed world are starting to slow down, he noted, and the competition, while not better, is starting to get “good enough.”

“The surprise to me this year has been how fast perhaps the smartphone business in the developed world has matured,” Wymer said. “I still think they have solid footing, … [but] we have plenty of examples in the handset business where profits evaporated overnight and, in some cases, [led] to losses,” he said, citing the examples of Research in Motion (BBRY), Nokia (NOK) and Motorola.

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